Following the Great Depression, the ideas of John Maynard Keynes rose to prominence as a means of mitigating widespread financial distress. He is seen as the progenitor of “soft socialism,” in the sense he provided intellectual credence to high levels of government spending and growth of the state.
Many of the free market reforms in the Western world in the 1980s were a conscious rebuttal of Keynesian policy, but Keynes’ influence was revived during the aftermath of the Great Recession in 2008.While the efficacy of his policy prescriptions remain controversial, there were some aspects in which he was misunderstood. Much of the vitriol from right-wing circles stems from this quote from his 1923 book, The Tract on Monetary Reform:
“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”
It’s often associated with Keynes’ support for governments running fiscal deficits in the short-term as a means of stimulating the economy during a recession.
Naturally, many fiscal conservatives feel this is a short-sighted policy. That being said, I believe some of the hostility to the quote should be reexamined, and perhaps a bit more credit should be given to the sentiment of Keynes in this regard.
A free market will take time
Long term economic growth is generally what’s best for the improvement of living standards for the vast majority of individuals, and as I’ve indicated in many previous writings, I believe that free-market ideals being advanced will be the best way of doing so.
I strive for a society not where everyone enjoys the same outcomes regardless of their merits, but simply one where everyone who seeks success has as good a shot as the person next to him, regardless of their race, religion, gender, etc.
This is not the system we have today – regardless of why you think this is, most can agree on this assertion. Libertarians often hold a free market as a requisite for such a society. Unfortunately this process is not something that occurs overnight, so what do we say to the people that do not have an equal opportunity as it stands, and are currently struggling to make ends meet?
In my view, it’s unacceptable to tell those working two jobs that they need to pull themselves up by the bootstraps and work harder, when in reality it’s numerous government interventions that create obstacles for them truly receiving the fruits of their labor.
Furthermore, telling such a person that they need to wait for such policies to be fixed so they can enjoy a true free market is also in vain, since Keynes’ statement holds true – in the long run we are all dead.
What’s the point for them to kill themselves working and wait for the alleged world where they will have an equal opportunity to make it, if they’re dead by that point? The emphasis must always be on long term growth, but we need to give more credit to Keynes’ morose statement.
So what must we do in the short term?
As mentioned earlier, many people that are genuinely working to the extent of their abilities are currently unable to make ends meet, in my opinion to little (if no) fault of their own in many circumstances. Many low income families are unable to send their children to college since a long term investment is untenable if there is no food and shelter being provided in the meanwhile.
Thus, many bright students in low-income households have no choice but to prematurely end their education prospects in order to provide for their families. There is no long term gain for them if their families can’t make it past the short term.
Family comes first, and this is something much of the right frequently preaches. And this is precisely why I support a negative income tax, at least until we reach the supposed society where everyone can enjoy an equal opportunity.
I won’t get into my rationale for why a negative income tax is preferable to any other sort of welfare, since I detail that in a previous blog post of mine here. An expanded Earned Income Tax Credit program is also a viable alternative. Such a policy would allow those seeking further education to pursue such investments, while not having to worry about sustaining basic necessities. Those whose skills are no longer useful in the workplace, for whatever reason, and need to update their talents to better fit market demands would also be able to similarly utilize the policy.
The internet has brought upon a decentralization of knowledge accessible to all, and the importance of this cannot be overstated, but the scarcity of time must be stressed. Just because someone can go to a library and learn how to code on their own, or pick up any other given skill, does not mean they are able to. A negative income tax will allow people to better find their place in our kaleidic economy, and thus provide more for others, the beauty of capitalism.
I’m usually the last person to give Keynes and his disciples any leeway in their often short-sighted policy proposals, but it may be in a capitalist’s best interests to understand that human beings are not eternal, and should not be chastised for the failures of government policy. A Negative Income Tax that provides a bare minimum, but nothing more, can ease the financial burden on much of America’s enervated working class.
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